Global LCD TV growth makes Corning shares look sharp

Not everyone has a flat-panel LCD TV. It just seems that way, and that makes shares in Corning (GLW), the leading manufacturer of the glass that goes into those TVs, look like a bargain.

Jefferies & Co. analyst George Notter initiated coverage of Corning late last week with a buy rating, saying he believes the Street is underestimating the potential size and trajectory of LCD panel shipments over the longer term. The analyst estimates that manufacturers have shipped roughly 490 million flat-panel TVs globally since the market for such goodies emerged, but that's just a fraction of the 1.5 billion TVs out there, most of which are still the old CRT kind.
"There's still a huge opportunity to replace the installed base of CRT TVs with flat panel TVs," wrote Notter in a report to clients Friday. "We also expect household penetration of TVs to grow significantly in emerging markets. Other drivers of this market include rising average screen sizes, shorter TV replacement cycles and governmental stimulus packages."

If Notter's assessment of Corning's opportunity is correct, then shares do indeed appear compelling on a relative valuation basis. At less than 12 times forward earnings, the stock offers a discount of 40% to the S&P 500 ($INX) and 30% to its own five-year average, according to Thomson Reuters. Furthermore, by the price-earnings-to-growth (PEG) ratio, which measures how fast a stock is rising relative to its growth prospects, Corning shares offer a discount of 50% to the broader market and nearly 10% to their own five-year average.

Notter's price target stands at $22.50. Throw in the 1.1% dividend yield and you get an implied return of more than 20% in the next 12 months or so.